Author Topic: Who has the best Cult? Dave Ramsey or MMM?  (Read 8836 times)

clarkfan1979

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Who has the best Cult? Dave Ramsey or MMM?
« on: November 14, 2020, 08:43:24 AM »
I listen to Dave Ramsey and I think there is minor overlap with MMM philosophy. I like Dave's approach and guidelines for affording stuff. For example, you shouldn't buy a new car until you have a net worth of one million. Until then, buy used. I also like his behavioral approach. It is very effective for the average person who sucks at money. Dave has helped millions of people get out of debt. However, do the followers of Dave understand the "costs" of his strategy? I don't think they do. My two main criticisms are below.

1) A 2nd or 3rd job is less time with your family/friends. This is damaging to your mental health and physical health.

2) There is a very large opportunity cost when you delay investing or focus on paying off a low interest rate mortgage.

This theoretical example below is based off of a conversation that I had with a good friend yesterday. No judgement. Dave works for him and I am happy for him. However, I am just trying to accurately measure the pros vs. cons.

Dave Fan (age 44): I contribute 15% of my income into the stock market (retirement accounts) and anything extra goes toward paying off the mortgage, which is a 15-year fixed at 2.875%. The primary will be paid off in 12 years. I would like to buy a rental, but I will pay cash. That will be in 18 years when I'm in my early 60's.

MMM Fan (age 41): I contribute 30% to the stock market. I pay the minimum on my 30-year fixed rate mortgage at 2.875%. If I have extra money, it goes toward the stock market, not paying down the mortgage. I also have 1.5 million in rental real estate with debt (40% equity). This does not include my primary. 

The Dave fan thinks the outcome will be the same for both people, but the Dave plan has less risk (no debt). I disagree that the MMM plan is more risk and I disagree that both fans will end up with a similar net worth in retirement. Yes, the MMM has more debt, but it also has more savings that goes toward investing. The Dave fan has less debt but they have more money going toward consumption and less toward savings/investing.

Imma

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #1 on: November 14, 2020, 09:18:19 AM »
One big risk in the MMM-philosophy is human behaviour. MMM assumes that all of us a rational people with spreadsheets to calculate just about everything. That only works for a specific group of people.

If you are an average person who can't sleep when the market is in the red for a couple of days/months, you should stick with Ramsey. Panic selling is worse for your net worth than paying off a mortgage and not sleeping at night is terrible for your health. You and I know that investing your life savings into one rental unit is a big risk, but real estate is much easier to understand for many people than the stock market. And one paid-off rental unit is a much lower risk than investing in something you don't understand recommended by your advisor.

In short: following Ramsey means you won't be poor (which is a major thing for the average person) but MMM is more likely to make you rich.

englishteacheralex

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #2 on: November 14, 2020, 09:25:26 AM »
I am honestly way more of a Dave Ramsey person than an MMM person. BUT...

1. We pay extra into our retirement, rather than pay down our mortgage quickly (MMM forum threads changed my mind on this)

2. We used the 10 year PSLF program to pay off my husband's master's degree (Dave would say no way but it saved us $10k and we knew it would work for us...and we were right)

3. We use index funds (he thinks index funds are for wimps but does concede that the biggest typical impediment to investment returns is not so much performance as people just not saving enough)

4. We vote democrat

5. We use credit cards for all of our expenses because we keep such careful budgets and records of our spending, and we see the credit card rewards as free money. We just aren't in danger of profligate spending due to cards, which is always his argument against them.



Right now we're saving up for a down payment to upgrade into a house from our condo, a process that may take around two years because of the market we're looking to buy in (very HCOL). Having all that cash in a money market account is making me realize why DR recommends putting extra money into paying off a mortgage--if it's in the mortgage you can't "accidentally" splurge on something else (he always says a bass boat). We are pretty disciplined about our money but I can feel the temptation of a big pile of it. I know we won't do anything rash but I also am starting to better understand his recommendation about paying off the mortgage.
« Last Edit: November 14, 2020, 09:28:24 AM by englishteacheralex »

OtherJen

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #3 on: November 14, 2020, 09:30:13 AM »
To be fair, the Ramsey strategy only seems to advocate the 2nd/3rd job when you are in a hair-on-fire debt emergency. I donít think thatís too different from much of what is recommended here.

We seem to do a hybrid. Weíre not in any hurry to pay off our mortgage and we invest in index funds, but we also have a fully funded 6-month emergency fund and no debt besides the mortgage. We also consider beans and rice to be a delicious meal rather than a strategy for temporary asceticism.

Malcat

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #4 on: November 14, 2020, 09:31:20 AM »
Dave is rules of thumb for people who are just starting out and can't actually think for themselves, because when they do, they tend to make stupid decisions.

MMM just facepunches people to realize that they don't have to think the way they do that leads them to stupid decisions.

The big difference is that Ramsey is selling a product: his advice in various commodified forms (courses, books, investment services, etc). MMM built a fan club for his personal life choices and happened to make money from it.

I don't really see Dave Ramsey as a cult, he's more like a 12 step program for the financially self destructive. MMM is a personality that attracts those who are already interested in being financially responsible.

There are similarities, but these are two very, very different products.

ETA: also, in your examples, you make the mistake of calling it an MMM plan. That's just one of the possible paths that a Mustachian can take, there is no prescribed MMM plan and that's what's most important to note.
« Last Edit: November 14, 2020, 09:33:28 AM by Malcat »

FINate

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #5 on: November 14, 2020, 09:50:46 AM »
There is no "best" way. This is true of almost everything in life. There's only what works best for each individual, which is a function of temperament and education.

The essential MMM investment philosophy clicked for me while taking graduate-level finance and accounting classes, long before finding this community. Once I understood the internals of MPT and was convinced of the math it was a no-brainer to invest accordingly. But the average person is essentially math illiterate, the stock market is scary, and they typically make a hash of investing decisions: chasing bond yields, inappropriate asset allocation, and buying high then selling low. There's a reason MMM has self-selected a high percentage of engineers, scientists, and other analytical types.

The best approach is the one that works to get people out of debt and into better financial health. For the vast majority of people, this means Ramsey.

RE item (1) on your list: Yes, a 2nd or 3rd job is unhealthy. Correct me if I'm wrong, I don't think Ramsey proposes this as a long-term solution, but rather a short-term fix to digging out of financial crisis. This is in-line with MMM thinking. And there's benefit to the pain involved as it brings home the true cost of spending beyond one's means.

Also, for the record, there are many MMMers that pay off their mortgages. I paid mine off as part of my plan before heading into FIRE. I already had plenty in investments, and paying off the mortgage means I have much lower income requirements, which means a very small EF goes much farther. I have zero regrets about not worrying about my investments during the pandemic and being able to sleep well at night.

Duke03

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #6 on: November 14, 2020, 11:18:46 AM »
I use to listen to Dave Ramsey years ago and I quickly learned that he dumbs it down to the lowest common denominator.... Nothing wrong with that, but in my case I'm not a financial dumbass and have never made the dumb mistakes his followers have made with money. Hence them needing Dave Ramsey in the first place.  So in my case I quickly moved on and found MMM.  My personal opinion is this place rocks!!!

John Galt incarnate!

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #7 on: November 14, 2020, 11:23:14 AM »

There is no "best" way. This is true of almost everything in life. There's only what works best for each individual, which is a function of temperament and education.



Right.

John Galt incarnate!

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #8 on: November 14, 2020, 11:28:44 AM »
My personal opinion is this place rocks!!!


+1.

And to answer  the OP's question, I prefer MMM but recognize that DR offers  good advice  to  beginners.


Zikoris

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #9 on: November 14, 2020, 11:30:36 AM »
Aside from his shitty investing advice, my main disagreement with Dave Ramsey is a philosophical one - it's very, very consumerist-focused. He seems to see low consumption as a temporary death march you go through so that one day you can consume like crazy, versus MMM who sees low consumption as the goal to save our planet. I don't see any of the stuff I do to like a more low waste life as a sacrifice or struggle - I genuinely want to do these things forever, because that's in accordance with my values and beliefs.

I could see the appeal of DR to a person with a lot of debt. I've never been in that situation - the only money problem I ever had was low income, which was fairly easy to solve.

K-ice

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #10 on: November 14, 2020, 12:03:13 PM »
The baby steps tweaked. (Your tweaking may vary)

1) $1000 EF. This seams smart. If you have hair on fire debt you shouldnít really have more cash than this lying around. I saw a screen shot from his book that puts this at $500-$2000. The vigilante DR fans give people shit for suggesting anything other than $1000. But $500 should be for those living in their parentís basement $2000 for the single income homeowner.

2) snowball all debt but your mortgage smallest balance first. I prefer avalanche with largest interest first. Or some blended version for emotional wins & mathematical wins. The important thing is put everything extra against just one thing to stay focused.

3) save 3-6 months EF. This is pretty sound advice at this stage. But once someone has money invested in a brokerage account (min 6 months invested) they can follow MMM springy debt instead of an EF.

4) 15% to retirement. A smart MMM follower would have started the match months ago. But I like that DR sets a 15% min before paying extra on the mortgage. Itís important to not neglect retirement in a race to pay off the mortgage. As an MMMer set a target here and stick to it. That can be 15% 40% or 60% or max all retirement + x% to a brokerage account. Also, he is so vague here about what to invest in so his ďadvisorsĒ get a kick back. The MMM crew is so open about VTSAX or a lazy portfolio or whatever you need to DIY.

5) kids college. DR Is also vague here. Iím Canadian so saving $2500/year is our target.

6) Throw everything extra at the mortgage. If you are happy with YOUR target in step 4 go for it at this point. (Edit to add I like the pay off your mortgage to time with your early retirement  date.)

7) live & give like no one else. Nothing wrong with this advice. You wonít quite be FI if you followed just 15% in step 4 but getting close.

The thing I hate about the DR group & even the blogs is itís always his way or you are blocked. The MMM  crowd is much more open to debate & discussion & finding what really works for you.  I see nothing wrong with responsible credit card or HELOC use. Buying cash flowing rental properties with a mortgage is something the DR crowd will miss out on.

« Last Edit: November 14, 2020, 12:13:05 PM by K-ice »

StacheDash

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #11 on: November 14, 2020, 02:36:31 PM »
I donít have a real estate empire. Is a running $1.5 million real estate empire really easier than having a second job?

nereo

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #12 on: November 14, 2020, 03:10:22 PM »
I donít have a real estate empire. Is a running $1.5 million real estate empire really easier than having a second job?

Are you talking about $1.5MM in properties, or that much in annual rent?  I'm guessing the former because why would someone with $1.5MM have a primary job? And are you property managing them yourself or paying a service?

It depends on the person, but IME it's easier to have 3-4 rental units than a second job, even managing them yourself. In many markets that can easily be $1.5MM
 If it's 30+ doors than it would depend on whether you have a property manager or not. But as I said... if you've got that many properties you are unlikely to need a primary job.

nereo

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #13 on: November 14, 2020, 03:15:47 PM »
In terms of the followers (the "cult") - I've found those over at DR to be dogmatic, militant and unforgiving of dissension.  Over here at MMM there are some who are a bit too eager to dole out 'facepunches'*, but broader recognition that there are many paths towards financial independence. I've had and witnessed far nastier exchanges over at DR than on MMM.

*worth re-iterating - closer reading of Pete's "facepunch" indicates it's intended to be self-inflicted.  As in: people ought to give themselves a proverbial facepunch for stupid financial decisions.  Unfortunately, too many have missed that subtlety and feel obliged to give others a 'facepunch', even when (and sometimes especially when) the poster is not prepared for it.

RetiredAt63

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #14 on: November 14, 2020, 03:43:58 PM »
In terms of the followers (the "cult") - I've found those over at DR to be dogmatic, militant and unforgiving of dissension.  Over here at MMM there are some who are a bit too eager to dole out 'facepunches'*, but broader recognition that there are many paths towards financial independence. I've had and witnessed far nastier exchanges over at DR than on MMM.

*worth re-iterating - closer reading of Pete's "facepunch" indicates it's intended to be self-inflicted.  As in: people ought to give themselves a proverbial facepunch for stupid financial decisions.  Unfortunately, too many have missed that subtlety and feel obliged to give others a 'facepunch', even when (and sometimes especially when) the poster is not prepared for it.


Exactly.  It's  like the rolled up newspaper method of house-training a puppy.  Oh no, I didn't pay attention and the puppy had an accident.  Whack whack whack MY head to remember to pay attention.

Malcat

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #15 on: November 14, 2020, 04:33:08 PM »
In terms of the followers (the "cult") - I've found those over at DR to be dogmatic, militant and unforgiving of dissension.  Over here at MMM there are some who are a bit too eager to dole out 'facepunches'*, but broader recognition that there are many paths towards financial independence. I've had and witnessed far nastier exchanges over at DR than on MMM.

*worth re-iterating - closer reading of Pete's "facepunch" indicates it's intended to be self-inflicted.  As in: people ought to give themselves a proverbial facepunch for stupid financial decisions.  Unfortunately, too many have missed that subtlety and feel obliged to give others a 'facepunch', even when (and sometimes especially when) the poster is not prepared for it.


Again, that's because Dave Ramsey is selling a system, and the system is supposed to work if the steps are followed, so adherence to the steps is obviously dogmatic.

Pete promotes critical thinking about the societal norms that are behind the "norm" of consumerist debt culture.

Paul der Krake

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #16 on: November 14, 2020, 04:38:01 PM »
MMM has an incredible forum considering how unprofessional it looks without custom Adblock rules. Thatís very cultish.

undercover

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #17 on: November 14, 2020, 06:23:50 PM »
Well in general they both agree that most debt is a hair-on-fire emergency. The whole throw your extra funds into index funds instead of paying down your mortgage was more a forum phenomenon and not something MMM wholly recommends (he acknowledges that living a simple lifestyle with a high savings rate is going to lead to a financially sound life regardless of the specific strategy you take).

Even though Iíve never heard or listened to a thing Dave has said, I am probably more like him than MMM because all my money is in real estate and itís all currently paid off. I donít particularly like index funds because theyíre boring and if I was in the stock market Iíd be invested in individual stocks and probably reading about stocks everyday. I just prefer actively investing I guess. I prefer the consistency and higher returns of real estate as well even though it is definitely more work and not for everyone. One day I will sell and go all index funds Iím sure to be honest. Real estate allowed me to become FI way earlier than I would have otherwise.

Iím not a super environmentalist but I donít believe in waste and I do believe in renewable energy. I donít believe in biking everywhere you go and I think truck ownership is great as long as youíre reasonable and actually using it as a truck.

MMM is (was?) fun to read...donít have to take it all to heart.
« Last Edit: November 14, 2020, 06:31:53 PM by undercover »

Mr. Green

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #18 on: November 14, 2020, 06:26:26 PM »
For most folks, there are some basic, financially savvy steps people can take that will solidly grow their wealth without concerning themselves too much with tiny optimizations. Low cost index funds or ETFs is a good example. Doesn't really take serious effort or consideration but yields a significant return over 30 years. The same goes for not paying off a mortgage rate under 3% early. The person that invests that money instead will come out so far ahead that it isn't even a contest. Most folks likely aren't thinking about it strictly mathematically, but from the perspective of "low hanging fruit," those are two of the easiest ways to improve returns long term.

Bloop Bloop Reloaded

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #19 on: November 15, 2020, 04:08:46 AM »
I'm not a fan of the 'work a 2nd job' thing. I think you're usually better off either developing your skills in your primary trade or working on some other aspect of your life/finances than taking on a 2nd job, at which you will be taxed at your marginal rate.

The exception would be where you're a permanent employee at your first job and you moonlight to do some cash in hand work using sick leave from your first job (that way you don't do any 'extra' work). But this is a breach of contract and is risky for a number of reasons. Doable though if you're clever enough, and lucrative.

Malcat

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #20 on: November 15, 2020, 04:32:56 AM »
I'm not a fan of the 'work a 2nd job' thing. I think you're usually better off either developing your skills in your primary trade or working on some other aspect of your life/finances than taking on a 2nd job, at which you will be taxed at your marginal rate.

The exception would be where you're a permanent employee at your first job and you moonlight to do some cash in hand work using sick leave from your first job (that way you don't do any 'extra' work). But this is a breach of contract and is risky for a number of reasons. Doable though if you're clever enough, and lucrative.

I personally think the 2nd job advice from people like Ramsey is partially to get people to realize how serious the situation is. Like "if you are in debt, yes, it really is serious enough to get a second job, so take it that seriously".

Also, for many people, just becoming more successful at their main career is quite the uphill battle. Most people would be more successful if they knew how to be. I'm not saying they can't learn how to be, but that can take time and be a significant barrier for many.

Taking on a second job can also really jolt someone out of complacency about their core career and income. And lastly, it can really push people to re evaluate the value of their time and money.

I know for me, I spent a half year working additional evenings and weekends early in my career, and making extra money at such an enormous personal cost really kicked my ass into valuing my time and not wasting the money that took time to make.

Overall, my point is that yes, it is more efficient and effective to just be more successful, but for the people that Ramsey is designed to help, that's unlikely to be a straightforward and timely option for them. It also doesn't fit nearly into a series of steps since the path to greater career success is highly individual.

It's hugely common advice here on the MMM forums though, since here it's all about personalized approaches to a similar philosophy.

Basically, different people need different advice at different stages of readiness.

toocold

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #21 on: November 15, 2020, 06:06:04 AM »
Dave Ramsey - Good for get out of debt up to your eyeballs.

MMM - Good for after you get out of debt and realize you can attain financial freedom.

There is obvious overlap.

Michael in ABQ

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #22 on: November 15, 2020, 06:40:10 AM »
Most people I know would probably not consider early retirement or think it was even possible to save significantly more than 15% towards retirement. Dave Ramsey's advice applies to 80-90% of people. The people who buy new cars, refinance their home to pull out equity for consumer spending, expect to work until they can start receiving Social Security, etc.

I followed his plan and it got us out of debt in about 2.5 years and in the five years or so since we've grown our net worth from a negative $30k to about $135k.

However, I would much rather retire in my 40s or early 50s with 1-1.5 million than keep working until 65-70 and have saved up 3-4 million.

PoutineLover

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #23 on: November 15, 2020, 06:46:42 AM »
I've never bothered with Dave Ramsey because even when I did have student loans I was very disciplined about paying them off and never got overwhelmed by my debt. I'm also not religious. I like MMM for the environmental aspects and the message about finding what you personally value and aligning your life around that and cutting out the bullshit. I'm not much for dogmatic thinking, there are so many different life plans and circumstances that an individual approach is always necessary. I do think for people who don't have a good handle on their finances, a step by step easy to follow plan is probably very helpful and DR is good for that.

ender

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #24 on: November 15, 2020, 06:55:43 AM »
I don't really see Dave Ramsey as a cult, he's more like a 12 step program for the financially self destructive. MMM is a personality that attracts those who are already interested in being financially responsible.

This is exactly the difference.

Dave Ramsey has a "this plan, if you follow it perfectly, will work better than what 80% of people on their own would do" approach. Which is true.

I'm sure all of us know people in our lives who are financial trainwrecks. Dave Ramsey is for them.  He's much less for people who build massive spreadsheets or save 50%+ of their income.

Overwhelmingly the average person is better off following everything Dave Ramsey says exactly. You are not going to end up in a bad place if you do, you might end up in a not-as-good-place but realistically it will work if you follow it exactly.

APowers

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #25 on: November 15, 2020, 07:03:07 AM »
OP talks about "Dave fans" and "MMM fans", but username is "Clarkfan", and doesn't mention Clark Howard... maybe one of the rules of following Clark is that you don't talk about following Clark?

rmorris50

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #26 on: November 15, 2020, 08:49:25 AM »
Dave Ramsey is entertaining but he is annoying because he doesnít make room for critical thinking and thinks his way is the Golden way.

I agree with him on behavioral credit card spending and how to snowball out of debt. Thatís about it.

Disagree with always have the mortgage paid off to retire.

I get pissed that he doesnít acknowledge that old life insurance and annuity policies (over ten years old) probably have rich guarantees, and you probably donít want to surrender them. Agree vast majority of people should just get term when considering buying new policies.

Also hate when he answers people ďbetter than I deserveĒ to the question how are you. How condescending. But I do watch him on YouTube for entertainment value.


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rmorris50

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #27 on: November 15, 2020, 08:50:54 AM »
Oh, Dave also hates the FIRE movement and thinks itís not good for the human soul, basically.


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SpaceCow

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #28 on: November 15, 2020, 09:38:07 AM »
I think MMM people are way smarter on average, but I'm biased. :D

alcon835

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #29 on: November 15, 2020, 06:42:24 PM »
I think Dave's foundation is way stronger than MMM's. Getting through the first few baby steps is life changing. Being able to live debt free opens up so many options that most people just don't have. He also rewires people into budgeting every dollar, which is extremely powerful and I've seen it change several lives. Compare that to MMM who mostly tells people in a bad situation to get over it and live an extreme life unattainable for a lot of people.

On the other hand, Dave's investment advice is based around making his endorsed providers money, which is terrible. He only recently opened up to Index Funds after years of fighting against the math because, well, it was inconvenient. But MMM's investment advice is life changing. He figured out how to FIRE at a young age and the math behind doing it successfully. He also takes Dave acolyte to the next level by challenging every "need".

So when I see people who are figuring out money, getting started in the world, or deeply in debt, I point them to Dave. When I see people who are doing okay for themselves but don't know what to do now that they've got the basics going for them, I point them to MMM.

Malcat

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #30 on: November 15, 2020, 06:49:07 PM »
I think Dave's foundation is way stronger than MMM's.

For the kind of people who need it.

A lot of people end up here because they're already very financially savvy and are happy to find their people and refine their knowledge and approach.

There are certainly some people here starting out deep in a hole, and often they are referred to a lot of Ramsey style content as first steps.

Ramsey's foundation is all about getting out of financial trouble, MMM's is more about harnessing frugality for maximum life satisfaction. Personally, I find the latter a far more robust foundation.

WhiteTrashCash

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #31 on: November 15, 2020, 06:55:52 PM »
I started off with Suze Orman's financial advice which is often similar to Dave Ramsey, except she thinks people can't ever retire. Their type of advice is good for people with backgrounds like mine where they start out knowing absolutely nothing about personal finance. When it all seems pretty scary and completely new, strategies like the "snowball" are effective at building confidence. The "snowball" doesn't make logical sense, but it makes sense from a psychological point-of-view and if using a non-optimal strategy helps someone stick with trying to right their financial situation, then more power to it.

MMM is basically a really charismatic version of "Your Money or Your Life" doled out in bits and pieces using a modern medium. MMM's ideas work best for someone who has basic knowledge of personal finance and wants to take the next steps to move from surviving to thriving.

My journey basically went from MyFico Forums to Suze Orman to reading mainstream financial websites to MMM. That's probably not much different than a lot of other people's journeys with maybe Dave Ramsey being a starting point for them. And for people with my sort of background, Ramsey is a good starting point because he incorporates a lot of cultural elements that are appealing such as incorporating Christian values.

Zamboni

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #32 on: November 15, 2020, 07:53:27 PM »
I find Dave's relationship advice to be no nonsense and entertaining. Some of the callers have gotten themselves into quite a mess financially, or they've done something silly like loan money to a family member. He's like that old school uncle who thinks he knows everything when he doesn't, but who shoots straight and sometimes is wicked insightful and tells people what they really need to hear.

Clearly Ramsey's fundamental investing flaw is his pushing of managed mutual funds . . . but I suspect he's getting big kickbacks from that industry, so he has a "feathering his own nest" conflict of interest in that regard. I think he's a smart guy, though, and he helped me understand the power of the Roth IRA as a tool, so I'm thankful for that. He's also wise to advise people to not get over-leveraged, because lots of people get into big trouble with that. But his biggest win is that he's probably on genius level for figuring out how to plug his financial advice schtick into all of the bible thumper empires. "Financial peace classes at church" <- that right there was marketing gold.

Overall, though, definitely MMM for the win. I've learned way more here about how to live my best life and make my money work than I would ever learn from hours and hours of Ramsey videos and books.

ender

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #33 on: November 15, 2020, 07:57:43 PM »
Clearly Ramsey's fundamental investing flaw is his pushing of managed mutual funds . . .

I've wondered about this and actually wonder if its a tactic he uses to get people to have a barrier to "uh oh market turmoil, sell sell sell" reactions.

I do not think this is the underlying motivation but I think, for many people, it's probably a cost that is worth it in the long run.

MrThatsDifferent

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #34 on: November 15, 2020, 09:03:59 PM »
DRís advice about snowballing debt got me out of a hole I had dug for myself. Once out I switched to MMM. Iím not religious about anything so adapted both to my needs. I also used this guy weíve got called the Barefoot Investor. Like any advice, take what works for you and discard the rest.
« Last Edit: November 16, 2020, 04:19:50 PM by MrThatsDifferent »

vand

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #35 on: November 16, 2020, 02:41:46 AM »
The more I listen to DR the less I like the inflexibility of his baby-step plan. Don't get me wrong, I think that if you are in over your head financially and have a tonne of debt then the "gazelle-like intensity" of a straightforward tick-the-boxes plan is great for getting you ass into gear and getting you on the straight and narrow... but I increasingly dislike the straightjacket approach to wealth building once you have your finances under control.

I find some of the material they pump out increasingly click-baity and borders on the patronizing and half-truths. Overall I still like DR and I understand that to have mass appeal you have to simplify a lot of things to a level where any idiot can easily understand it, but its for the great unwashed masses. Hogan in particular takes this type of sloganing to the extreme.


habanero

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #36 on: November 16, 2020, 03:20:29 AM »
The Dave fan thinks the outcome will be the same for both people, but the Dave plan has less risk (no debt). I disagree that the MMM plan is more risk and I disagree that both fans will end up with a similar net worth in retirement. Yes, the MMM has more debt, but it also has more savings that goes toward investing. The Dave fan has less debt but they have more money going toward consumption and less toward savings/investing.

I think a lot of people who are
- financially responsible as in not getting into much dept and living within means
or
- mange to cure irresponsibility by the Dave approach or in another way

often significantly underestimate the risk of running out of money in the long term. We had a big pension reform some years back which went from defined benefits to mostly something similar to the 401(k) where employers pay in some sum every month and this gets invested in some way and then the market does what it does and you have what you have when you retire. In addition there is a base layer of social security, but it will cover a rather small part vs the salary. The problem is that some employers don't contribute much as the legal minimum is very bad (2% of pay I think, others are quite generous) and most investment profiles have way to little risk (20/80 with pretty high fees used to be default most people don't change or is even aware of) so returns won't be much if even positive in real terms. And most people don't even think about this or hasn't managed to realize that their parents retired under an entirely different system with much better guaranteed benefits.

There has been some studies here where they look at what people want to do when they retire and how much money they are likely to have when they retire and the gap between the two can be very big. Planning for something as remote as retirement is quite far down the list for most, and there is little understanding of the magic of time and compounding.

It is a rather wide bridge to cross to go from dealing with stupid shit done to understanding how money and markets wors and what they can do for you if you handle it in a smarter way and start doing so early. People are quite surprised when I tell them just what some small amount easily available to most - like the cost of a restaurant meal or buying used vs new or whatever) would have grown to if invested instead of spent. The idea has not even crossed their mind.

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #37 on: November 16, 2020, 06:25:42 AM »
There have always been financial gurus.  My first was Brian Costello (Your money and how to keep it) and then Gail Vaz Oxlade.  Gail's show was at the Dave Ramsey how to get out of debt level, without the religious aspect, but she also has books that take things to the next level.  Very practical and blunt and also sympathetic when needed.

nick663

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #38 on: November 16, 2020, 06:28:37 AM »
DR has the better cult as his rules are more rigid and enforced.  They frequently delete posts and ban people who speak of tactics that are different than Dave's teachings.

I understand Dave's place in the world and consider myself lucky to have never needed someone like that.  I wish he would add some nuance to his message though as there are scenarios where his advice is just awful:  skipping 401k match to pay down debt, potentially paying off a low interest car loan ahead of CC debt, etc.

ender

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #39 on: November 16, 2020, 06:30:50 AM »
Hogan in particular takes this type of sloganing to the extreme.

Of all the Ramsey personalities, he is one of the worst as far as information quality imo.

I do not think he really understands much of the financial implications of what he preaches.

DadJokes

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #40 on: November 16, 2020, 06:56:51 AM »
I'll answer the question in the subject, rather than the actual post, because that's more fun.

Between the two, DR's following more closely resembles a cult. I've seen people booted from the Facebook group for suggesting even the slightest variance from the baby steps. DR followers have easy ways to identify each other in public (pay for everything with cash, respond to the greeting, "How are you?" with "Better than I deserve"). DR's followers will do whatever he says. He could go out and endorse a timeshare company (not that he ever would), and his followers would jump at them.

MMM, on the other hand, isn't a very good cult leader, because I think that he (and other FI personalities) are more interested in getting people to think for themselves.



With the fun part addressed, I do think it's silly how much criticism DR gets in various personal finance circles (including these forums). While his advice may not be 100% optimal, it works for a lot of people, and you can't deny that he has done a lot of good (more so than MMM just due to reach).

slappy

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #41 on: November 16, 2020, 07:53:24 AM »
I listen to Dave Ramsey and I think there is minor overlap with MMM philosophy. I like Dave's approach and guidelines for affording stuff. For example, you shouldn't buy a new car until you have a net worth of one million. Until then, buy used. I also like his behavioral approach. It is very effective for the average person who sucks at money. Dave has helped millions of people get out of debt. However, do the followers of Dave understand the "costs" of his strategy? I don't think they do. My two main criticisms are below.

1) A 2nd or 3rd job is less time with your family/friends. This is damaging to your mental health and physical health.

2) There is a very large opportunity cost when you delay investing or focus on paying off a low interest rate mortgage.

This theoretical example below is based off of a conversation that I had with a good friend yesterday. No judgement. Dave works for him and I am happy for him. However, I am just trying to accurately measure the pros vs. cons.

Dave Fan (age 44): I contribute 15% of my income into the stock market (retirement accounts) and anything extra goes toward paying off the mortgage, which is a 15-year fixed at 2.875%. The primary will be paid off in 12 years. I would like to buy a rental, but I will pay cash. That will be in 18 years when I'm in my early 60's.

MMM Fan (age 41): I contribute 30% to the stock market. I pay the minimum on my 30-year fixed rate mortgage at 2.875%. If I have extra money, it goes toward the stock market, not paying down the mortgage. I also have 1.5 million in rental real estate with debt (40% equity). This does not include my primary. 

The Dave fan thinks the outcome will be the same for both people, but the Dave plan has less risk (no debt). I disagree that the MMM plan is more risk and I disagree that both fans will end up with a similar net worth in retirement. Yes, the MMM has more debt, but it also has more savings that goes toward investing. The Dave fan has less debt but they have more money going toward consumption and less toward savings/investing.

I think it's worth pointing out that mortgages have not always been "low interest". Lower than other debt, sure, but Dave has been around for awhile. I'm sure a lot of people that listened to him had higher rate mortgages in the past. I worked at a bank and the number of people who would withdraw huge sums from their IRA to pay off their mortgage was depressing. I mean, you just could not talk these people out of it. 25% taxes? Don't care, I need that mortgage paid off. So frustrating.

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #42 on: November 16, 2020, 08:05:08 AM »
MMM would suck as a cult leader because we question/debate/pick apart every single thing he posts. And I'm not saying that's wrong or anything; I think it's healthy to dissect ideas.

As others have said, DR tolerates no, or every little, deviation from the Baby Steps. I used to listen to him daily about 6 or 7 years ago, and it got pretty old pretty fast in that there just wasn't much diversity in the calls. I don't think most people listen for the financial content, or if they do, it's secondary to Dave's personality. I think they mostly listen for the messenger. They like Dave's snark, they like his rants, they him sprinkling in religious and 'down home' sayings.

But Dave apparently understands he's not immortal, so he has scaled his persona with more 'Ramsey Personalities," something I'm not sure if cult leaders do or not?...maybe? They know that going under his umbrella gets them a level of fame and success they'd never get solo.


Phenix

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #43 on: November 16, 2020, 08:56:30 AM »
OP talks about "Dave fans" and "MMM fans", but username is "Clarkfan", and doesn't mention Clark Howard... maybe one of the rules of following Clark is that you don't talk about following Clark?

Am I the only one who saw "Clarkfan" and thought Clark Griswold?

DadJokes

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #44 on: November 16, 2020, 08:58:12 AM »

But Dave apparently understands he's not immortal, so he has scaled his persona with more 'Ramsey Personalities," something I'm not sure if cult leaders do or not?...maybe? They know that going under his umbrella gets them a level of fame and success they'd never get solo.

Trying to extend his legacy beyond himself hasn't gone well. Most of his "Ramsey Personalities" are painful to listen to, because they're essentially just yes-men (and women) to DR.

His daughter, Rachel Cruze, is about the only one I can bear to listen to. I wish Chris Hogan had better content. He's got a voice like butter.

slappy

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #45 on: November 16, 2020, 09:08:41 AM »
OP talks about "Dave fans" and "MMM fans", but username is "Clarkfan", and doesn't mention Clark Howard... maybe one of the rules of following Clark is that you don't talk about following Clark?

Am I the only one who saw "Clarkfan" and thought Clark Griswold?

I always think of Clark Kent for some reason.

Phenix

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #46 on: November 16, 2020, 09:16:06 AM »

But Dave apparently understands he's not immortal, so he has scaled his persona with more 'Ramsey Personalities," something I'm not sure if cult leaders do or not?...maybe? They know that going under his umbrella gets them a level of fame and success they'd never get solo.

Trying to extend his legacy beyond himself hasn't gone well. Most of his "Ramsey Personalities" are painful to listen to, because they're essentially just yes-men (and women) to DR.

His daughter, Rachel Cruze, is about the only one I can bear to listen to. I wish Chris Hogan had better content. He's got a voice like butter.

I saw Chris Hogan speak at an Entreleadership conference back in 2014.  His rehearsed presentation was fantastic, but when I tried to discuss the presentation further with him in the hallway during a break, he really didn't have much to add.  Since then I've received him as more of a marketing tool for Ramsey rather than an expert in the personal finance realm.

Psychstache

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #47 on: November 16, 2020, 09:28:28 AM »
OP talks about "Dave fans" and "MMM fans", but username is "Clarkfan", and doesn't mention Clark Howard... maybe one of the rules of following Clark is that you don't talk about following Clark?

Am I the only one who saw "Clarkfan" and thought Clark Griswold?

I always think of Clark Kent for some reason.

iirc, the OP is originally from Chicago, so Griswold is the most likely option.

Telecaster

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #48 on: November 16, 2020, 09:42:12 AM »
+1.

And to answer  the OP's question, I prefer MMM but recognize that DR offers  good advice  to  beginners.

I'd frame it slightly differently.  DR offers good advice for people who are bad with money.   For example, paying down the mortgage is a suboptimal strategy--unless you are bad with money.   If you pay the minimum on the mortgage and spend the difference you are better off putting some of that on the mortgage where you can't spend it.  If you are a person who unthinkingly runs up credit card bills, then you are better off not having a credit card.  For people like that--and there are a lot of people like that to one degree or another--he has good advice.   

But for people who aren't like that, DR gives suboptimal advice for sure.   And that includes beginners. 

phildonnia

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Re: Who has the best Cult? Dave Ramsey or MMM?
« Reply #49 on: November 16, 2020, 10:01:34 AM »
So, I've seen the phrase "shitty investing advice" already on this thread, in reference to Dave Ramsey.  Anyone who's researched the criticism on DR would also find such terms as "unrealistic return expectations".

I can imagine, many decades from now, a former DR disciple confronting him: "Hey, you told me I could consistently earn 12% in the markets!  That was a lie; I only made 8%!".  And the answer might be: "Well, it got you to invest and become a millionaire, so sorry, my bad -- guilty."

He more or less explicitly says this concerning his strategy of paying debts smallest-to-largest, regardless of interest rate.  This one item is the most forehead-slap-inducing piece of advice among his critics.  But he would argue that people who begin by paying the largest debts first will see no progress, and eventually give up; which leaves them worse off than if they did the mathematically correct thing.

There's a saying that "The best diet is the one you will follow".  Using that as a metaphor, MMM is saying that you should cut back on the fat and carbs, eat lots of vegetables, and exercise regularly for the rest of your life. DR is putting you on the South Beach diet, or somesuch.  The first option probably has the best outcome, but the second sells millions of books and results in somewhat healthy people.